A shift in the narrative: first of its kind precedent in allocation of legal fees

Recent Court of First Instance Ruling: a shift in narrative or a conditioned prerequisite for recoverability of legal costs?

At Horizons & Co, under the supervision of Mr. Areen Jayousi, Partner in the Dispute Resolution Department, and with the support of Associate Rana Moustafa, along with Dr. Mohamed Mahrous, Partner in the Litigation Department, our firm recently secured a significant judgment before the Dubai Court of First Instance regarding the recoverability of legal costs.

In alignment with a recent judgement of the Dubai Court of Cassation¹, the Dubai Court of First Instance has once again affirmed the nascent narrative and has overturned the established practice of awarding only nominal legal costs, even when higher amounts were contractually stipulated.

¹ Dubai Court of Cassation judgement No.503/2025, 23/07/2025.

The case

The Claimant, in these proceedings was a U.S. incorporated company specialising in cybersecurity products and services, initiated legal proceedings in Dubai Courts to recover outstanding payments totaling USD927,716.16, along with legal interest at 1.5% per month from August 2023 until full settlement.

Importantly, in addition to the principal debt and accrued interest, the Claimant sought AED 200,000 in legal costs pursuant to a legal services agreement, along with court costs and related expenses.

The Defendant is an LLC incorporated in Dubai. The dispute arose from unpaid invoices issued for services rendered, which led the Claimant to engage us at Horizons & Co to initiate recovery proceedings through the local courts.

Central to the Claimant’s demand for legal fees was a Clause in the services’ agreement, which clearly provided that in the event the Claimant was required to engage a collection agency or legal counsel to recover overdue payments, the distributor (the Defendant) would be liable for all reasonable collection costs, including lawyer’s fees. The Engagement Letter and related documentation outlining the scope and terms of legal services were submitted in support of this claim.

The Court found in favor of the Claimant and ruled that the lawyer’s fees claimed were consistent with the contractual terms agreed between the parties. Based on the evidence presented, including the Engagement Letter, invoices, and proof of services rendered, the Court accepted the Claimant’s claim for legal costs in full, ordering the Defendant to pay AED 200,000 in attorney’s fees in accordance with the fee agreement.

This ruling reinforces the growing importance of well-drafted contractual provisions in the context of cost recovery.

While full reimbursement of legal fees remains exceptional in UAE onshore litigation unlike in common law-based jurisdictions, this judgment demonstrates that the Dubai courts are willing to enforce contractual fee clauses when they are unambiguous and supported by proper documentation.

Key takeaways

At Horizons & Co, we advise our clients that to maximise cost recovery in commercial disputes, parties should ensure that their contracts include clear and enforceable provisions regarding legal fees. Equally critical is maintaining comprehensive documentation including invoices, Engagement Letters, and payment receipts that demonstrate the fees incurred are directly linked to the legal dispute and proportionate to the services provided.

Conclusion

Our case examined before the Court of First Instance appears to be a continuation of a well publicised case No. 503/2025. There appears to be a judicial trend being formed that allocates legal costs and recoverability if there is a clear clause embedded in the agreement between the parties.

These decisions empower parties to negotiate more robust contractual protections and provide a clearer roadmap for cost recovery in litigation; we view this development as a long-awaited acknowledgment of contractual autonomy and a crucial step forward in promoting fairness and predictability in legal proceedings.

We strongly encourage clients to review their existing agreements, particularly in loan, service, shareholder, and agency contexts to ensure that legal fee clauses are both present and enforceable. It remains our main advice that proper documentation and early legal strategy will now play an even more vital role in securing the full recovery of litigation costs.